The importance and the diversity of grasslands and grassland-based systems are illustrated. Their multiple functions and values are highlighted. The main trends of the evolution of the systems in the last half-century are summarized including the effect of the Common Agricultural Policy of the European Union. Grasslands are compared with annual forage crops for forage production potential and impact on the environment. New challenges are analyzed especially in relation to agro-fuel production. The potential of grasslands for fuel production is discussed as well as the possible effect of first-generation agro-fuels on the grassland area. The fractionation of grassland biomass into several products like fibers, lactic acid and amino acids is described in relation to possible industrial uses. Policy recommendations are proposed.